Apple’s CEO Sees “Big Plans” Ahead in 2014

Investors remained sour on Apple throughout much of the first half of the year. Things only started to tick up during the late summer when the rumor mill started really buzzing about the coming release of Apple's next generation of iPhones. Since then, Apple has notched a number of impressive wins and now looks poised to finish 2014 in positive territory, although well behind its benchmark, the Nasdaq.

Watch out for Apple in 2014Especially with some significant moves of late, such as Apple's long-awaited deal with China Mobile, the company is entering 2014 with investors' confidence higher than perhaps at any point over the last year. And Apple investors recently had this message reiterated straight from the horse's mouth when an internal memo from Apple CEO Tim Cook was leaked that underscored Apple's big plans for the year ahead.

Much of the memo, which you can find here, recaps many of the business and corporate highlights Apple experienced in 2013, including successful updates to Apple's iPhones and iPads, the App Store celebrating its 50 billionth download, and the rollout of its two new operating systems: iOS 7 and OS X Mavericks.

Cook concludes the memo with a nod to the year to come, which says the following (emphasis added by author):

We have a lot to look forward to in 2014, including some big plans that we think customers are going to love. I am extremely proud to stand alongside you as we put innovation to work serving humankind's deepest values and highest aspirations. I consider myself the luckiest person in the world for the opportunity to work at this amazing company with all of you.

Although Cook doesn't give much in the way of detail, this echoes a common refrain we've seen him preach consistently during his time at Apple's helm.

So, what could he be talking about?

Apple's coming updates By now, it's well established that Apple refreshes each of its core line of products (iPhone and iPad) annually, so that hopefully won't qualify as "big plans" among Apple's top brass. But a number of rumors have already surfaced about possible changes coming to Apple's core products in the coming year.

According to various checks with Apple's Asian suppliers, it appears screen size will be a major focal point for this year's iPhone update. Analysts and media are claiming Apple will once again bump up the iPhone's screen size to somewhere in the neighborhood of 4.8 or 4.9 inches for the iPhone 6. This certainly seems plausible as smartphone screen sizes have been consistently on the rise over the last several years. It's also been suggested that Apple could move up the launch of next year's iPhone. We've seen such rumors surface plenty of times in the past, but it's still worth keeping an eye on for Apple next year as the iPhone is the company's primary financial driver.

When it comes to iPad rumors, early speculation has also been geared toward the possibility of a Apple adding a larger 13-inch screen with next year's product update. But it's hard to see the justification from a product standpoint as the 13-inch tablet would put the iPad directly against Apple's smallest laptop offerings. As with the iPhone rumors, these early storylines carry little weight at present, but they are certainly worth monitoring in the early months of 2014.

Source: Apple

It's probably fair to argue that these rumors, even taken in total, fall short of the "big plans" Tim Cook referred to in this memo. What's the implication?

New products from Apple in 2014? It's been long expected that Apple has at least one significant new product in development, with a smart watch and/or dedicated TV device being by far the two most commonly cited potential products.

Between the two, I believe Apple is far more likely to enter the smart watch space for several reasons. For starters, the concept has been validated already. It's clear there's a budding market for these smart watches. Two major tech firms, Samsung and Qualcomm, have already introduced Android-based smart watches -- and despite their obvious technical limitations, Samsung's have sold surprisingly well since their release.

Also, the odds probably favor the iWatch as the most likely product for Apple to release next year in that it presents fewer hurdles for Apple than a smart TV would. From a bottom-line perspective, it's still hugely unclear whether the economics of the television industry are even attractive enough to suit Apple. TV gross margins often sit somewhere in the teens, far below Apple's famously high premium-pricing points.

Furthermore, Apple's control-freak nature also probably makes a smart watch a more likely candidate to hit the market than a smart TV. Apple has a long history of controlling all aspects of the user experience. This implies that it would likely want some way to control the content for a smart TV, as it has done with music via iTunes and the iPhone and iPad via the App Store. Unfortunately, it remains hard to see just how Apple would be able to do so with content like television and movies. Given the dominance its gained with music and the lucrative contract most content providers already have in place with TV distributors, it seems unlikely Apple would be able to offer terms that are satisfactory to all parties. Whereas with an iWatch, Apple would still own the software and content experience.

Bottom line for Apple It's been years since Apple unveiled an entirely new product line, although it's hinted at such offerings for some time now. As we move into another new year, the stage seems set perhaps more than ever before for Apple to make another bold product leap.

And although it seems some products appear more viable at present than others, Apple shareholders would most likely benefit from at least one new growth driver for the world's largest publicly traded company. So, as we move into another new year, we'll have to wait and see whether Apple's "big plans" will be enough to keep investors happy.

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